MARK DODSON has warned that Scottish Rugby faces a period of significant retrenchment as a consequence of the Covid-19 pandemic, despite the cash injection of “north of £20 million” which will arrive off the back of Guinness PRO14 selling a 28 percent stake in the league to CVC private equity house.
The chief executive insists that the CVC money will be ring-fenced until the full impact of the pandemic has been assessed and a recovery plan has been formulated. The SRU’s share in the deal – which is less than that being paid to Wales and Ireland, who each have four teams in the league compared to Scotland’s and Italy’s two – will arrive in unspecified instalments, with the first tranche due “almost immediately”.
Dodson also insisted that the value of the deal had not fallen as a consequence of the current turbulent economic climate, although it seems likely that the timings of payments have been altered due to the uncertainty which currently surrounds the game. “The value is the same, that is what has surprised people, we have come out of it with a slightly different shape deal but the values are the same,” he stressed.
“We have been talking to private individuals and particularly CVC for the last two or three years and have got to know them very well. They understand rugby and rugby ecology. As we went into Covid-19, it was a shock for everyone. They took their time to think about how they wanted to deal with it, it took longer to conclude because of that, but we have come out with a solidarity around the sport itself and a deal we are very happy with on both sides.”
While the investment is a welcome boost to Murrayfield’s finances, Dodson stressed that its potential impact should be kept in perspective at a time when there is a very real danger that the Six Nations cannot go ahead, which would could cost Scottish Rugby £40million (two thirds of last year’s turnover).
“It helps enormously, gives confidence to our banks, it gives confidence to everyone around, but it’s not a cure,” he said. “If this goes into next year it could be £40m. Until we get our arms around exactly how much this is going to cost the union in terms of lost income we are not out of the woods by any stretch of the imagination.
“We’re delighted with this, but by no means are we underestimating the challenges ahead of us. It is not going to make a fundamental short-term difference to the business.
“We’ve got to understand the new future,” he added. “We’ve been expanding this business for the past ten years and now you’re going to see a period of retrenchment. Nobody knows what sort of shape rugby – be it grassroots, professional or international – is going to be in in the future. So that’s why we want to make it very, very clear: this money is safe-guarded, it’s ring-fenced.”
Dodson confirmed that the current strategy in terms of staff being furloughed and earners over £50,000 taking wage cuts has not changed as a result of this investment.
CVC’s 28 percent share in the league leaves the Unions with a 72 percent share collectively, raising questions about whether the private equity house working in conjunction with one of the Unions could take control of the business.
“Without going into the complexities of the governance of how it will work, it doesn’t work like that,” said Dodson. “There are safeguards around sporting regularity matters, safeguards around the commerciality.
“They see themselves as partners, they want to influence the game in terms of commercial aspects, but what they are not going to be involved in is the sporting and regularity aspects, and we have made sure protections are built in around that.
“We have gone to tremendous lengths to make sure this deal has been endorsed [inside Murrayfield]. We have our own Board and our own investment committee, which is made up of members of the Council, members of the Board and we have also had Dickson Minto, a famous and respected financial house in Edinburgh, as an independent advisor to the Board and investment committee. We have also had our advisors that have been advising the Celtic unions and the PRO14 so we have had various levels of oversight and all have come to the conclusion that this is a good deal.
“I think at the moment Covid-19 has paused a lot of people’s ideas about negotiating broadcasting deals. We’ll regroup and we’ll go out and consult, and broadcast is just one of many areas where we will recalibrate, but I expect to see a host of broadcasters to be queuing up to ensure that they are part of PRO14 going forward.”
CVC’s ownership of Formula 1 between 2006 and 2017 has not been universally acclaimed, with critics arguing that their short-termist approach hollowed out the sport, sacrificing accessibility for a quick buck.
“Whatever deal they struck with Formula 1 and how that worked is another issue,” rebuffed Dodson. “On this deal they have committed a significant amount of money to the league, and the ambition is that everyone will earn more. The whole purpose of inviting an investor into the league is that it can supercharge revenues.
“The idea is that we can bring extra money into the league for everybody, them included, so our whole purpose is to make sure this is how we maintain PRO14’s growth.
“This deal sees a long-term sustainable league. We understand that there’s going to be disruption for up to nine, ten months through coronavirus. They are looking way beyond that: it’s a commitment to our league in the longer term. In real terms it’s going to take a good number of years to supercharge the commercials without it. So, they’re seeing this as very much a long-term play.”